December 28, 2020

Copyright Small Claims Court Established as Part of Spending and COVID-19 Relief Package

Included in the $2.3 trillion spending and coronavirus pandemic relief package signed yesterday by President Trump was the Copyright Alternative in Small-Claims Enforcement (CASE) Act, an alternative dispute resolution program that was first approved by the House of Representatives on Oct. 22, 2019.

The CASE Act of 2019, introduced under H.R.2426, creates a Copyright Claims Board to decide copyright disputes from within the U.S. Copyright Office. The legislation Congress passed last week was mostly unchanged from H.R. 2426.

Bypassing Federal Courts

The CASE Act helps parties bypass the current system requiring all copyright litigation to be filed in federal court. Due to the tremendous time and expense associated with federal infringement litigation, many small companies and individuals are discouraged from pursuing small claims for copyright infringement.

The new Copyright Claims Board will comprise three attorney officers and at least two other attorneys, as an alternative to an Article III court for copyright litigation. The board could decide infringement claims, declarations of non-infringement, misrepresentation, and related defenses and counterclaims. The new board would generally be excluded from hearing claims/counterclaims decided by or pending before a court of competent jurisdiction, by or against a federal or state governmental entity, or against a person or entity residing outside the United States.

Remedies include monetary damages with a cap of $15,000 per work infringed and $30,000 per proceeding. The board would also have the ability to enter agreements to cease infringements.

60 Day Opt-Out Period

A respondent must be properly served with a notice and claim. Once served, the respondent will have a 60-day period to “opt out” of the board proceeding by providing a written notice to the board. If the respondent does not timely opt out, a final determination by the board will generally preclude re-litigation before any court or tribunal, including the board itself. Although the board’s determinations are not binding on Article III courts, courts cannot vacate or modify these determinations, except in rare occasions of fraud, misconduct or lack of authority – similar to grounds for setting aside an arbitration award.

Constitutional Footing

The Copyright Claims Board is similar to the Patent Trial and Appeals Board (PTAB) established by the U.S. Patent Office nearly a decade ago. Both the PTAB and the Copyright Claims Board grant a governmental agency judicial power traditionally reserved solely for Article III courts. In Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, the U.S. Supreme Court upheld the constitutionality of the PTAB, created by Congress under the 2011 America Invents Act (AIA), and its ability to review the validity of patent claims. The PTAB routinely invalidates patents on novelty grounds.     The CASE Act may be challenged on similar constitutional grounds as the PTAB. 

Copyright Trolls

The CASE Act has been criticized as opening the door for “copyright trolls,” because it reduces the obstacles to filing for relief under a copyright infringement. However, copyright owners, such as small businesses without sufficient funding for standard federal litigation may make more use of the Copyright Claims Board to resolve these smaller disputes.

For those who might consider pursuing claims under the CASE Act, consulting with experienced intellectual property counsel is recommended before moving forward with a board claim.

For more information or to discuss this matter, please contact one of the members of our Intellectual Property Practice.